Risk pooling of customers to reduce premiums may become irrelevant as new developments in digital technology emerge, according to the Geneva Association.

The insurance think tank predicts insurers will reduce claims volatility at an individual level so the utility of the customer will not be increased through pooling.

As increased data mining spurs the development of fully individualised insurance policies, some customers will be denied coverage or face higher costs, the association says in a new paper. This will be accentuated as the economy grows more digitalised.

Governments should drive debate over this issue, but the insurance sector should continue to provide adequate cover, the paper says.

The association says data gathered by real-time monitoring and visualisation to influence customer behaviour and reduce premiums is fundamentally changing the relationship between insurers and customers. Increasing use of technology is shifting the role of insurance from loss indemnity towards helping customers mitigate and manage risks.

The industry is becoming much more customer-centric, the think tank says.

Technological advances will allow for more efficient and effective mitigation, which will lead to powerful business models.

Digital advances are also expected to bring major changes in motor insurance.

By 2020 about 20% of vehicles worldwide are expected to be fitted with safety systems that will reduce accidents and the value of personal motor policies.

Liability for accidents is likely to shift from drivers to manufacturers as self-driving vehicles hit the roads in the next two decades, the paper says. It cites a McKinsey report suggesting the total volume of vehicle insurance could decline by 25% by 2035.